TABLE OF CONTENT

CHAPTER TITLE PAGE

Declaration
Acknowledgement
Executive Summary
Table of content
1 Introduction 2
2 Industry profile 7
3 Company profile 24
3.1 Introduction of bank 25
3.2 History of bank 26
3.3 Social contribution 31
3.4 Financial strength of bank 32
3.5 Awards 33
4 Theoretical framework 34
5 Literature review 56
6 Research methodology 58
7 Data analysis 62
8 Finding 82
9 Conclusion 84
Bibliography 86
Annexure

1
 CHAPTER.1
INTRODUCTION

2
1. Introduction:

Bank and banking are the most important and major factors in today's
world economy. Each and every transaction is routed through banking.
Not a single business is possible without banking activity. The bank and
the business are related. Today we cannot imagine the business world
without banking institution. Banking is an important as blood in the
human body. Due to the development of banking, advances are increased
and business activities developing so it is rightly said, "The
development of banking is not only root but also the result of the
development of the business world

In the economic development of a nation banks occupy in important

place. Banking institution from an important part of the money market
and are indispensable in a modern and are indispensable in a modern
developing society, Banking is the life blood of modern economic

The importance of co-operative Banking institutions in India has been

considered as the backbone of rural economy. At the industrial
development of the country is taking place banking services are also
expanding and efficiency of co-operative bank in various channels. Due
increasing trend in globalization and liberalization in the service industry
like banking section varachha co-operative banks are playing crucial role
before their competitors. Now a days varachha co-operative banks
activities of Gujarat is on the top and whole economy co-operative
activities are such as it not depend on any govt. rules and regulations.

3
1.1 MEANING AND DEFINITION:

Bank is an institution that deals in money and its substitutes and

provides crucial financial services. The principal type of baking in the
modern industrial world is commercial banking & central banking.

Banking Means "Accepting Deposits for the purpose of lending or

Investment of deposits of money from the public, repayable on demand
or otherwise and withdraw by cheque, draft or otherwise."
Banking Companies (Regulation) Act, 1949

The concise oxford dictionary has defined A bank as "Establishment

for custody of money which it pays out on customers order." In fact this
is the function which the bank performed when banking originated.

"Banking in the most general sense, is meant the business of receiving,

Conserving & utilizing the funds of community or of any special section
of it."
By H.Wills & J. Bogan

A banker of bank is a person, a firm, or a company having a place of

business where credits are opened by deposits or collection of money or
currency or where money is advanced and waned.
-By Findlay Shears

4
 Thus,
A Bank:
1. Accept money from public.
2. Lends or invests money.
3. Repays the amount of demand.
4. Allow the money deposited to be with draw by cheque or draft.
5. Pays interest on money deposited with it.

1.2 Origin of Banking:

Its origin in the simplest form can be traced to the origin of authentic
history. After recognizing the benefit of money as a medium of exchange,
the importance of banking was developed as it provides the safer place to
store the money. This safe place ultimately evolved in to financial
institutions that accepts deposits and make loans i.e., modern
commercial banks.

1.3 Origin of Word Bank:

The origin of the word bank is shrouded in mystery. According to one
view point the Italian business house carrying on crude from of banking
were called banchi bancheri" According to another viewpoint banking is
derived from German word "Branck" which mean heap or mound. In
England, the issue of paper money by the government was referred to as
a raising a bank.

5
1.4 Functions of Banks:

Primary Functions:
1. Acceptance of deposits
2. Making loans and advances
3. Over Drafts
4. Cash credit
5. Discounting of bills of exchange.

Secondary Functions:
1. Agency functions Collection of cheques & Bills etc.
2. Collection of interest and dividends.
3. Making payment on behalf of customers
4. Purchase & sale of securities Facility of transfer of funds
5. To act as trustee & executor.

6
 CHAPTER.2

INDUSTRY PROFILE

7
2.1 The Banking Industry
The structure of the banking industry, its performance an efficiency
which in turn, affects the banks, ability to collect savings and channel
them into productive investments. The success of banking sector very
much depends on the ownership of banks-whether private or public or
mixed-whether the industry is competitive or regulated in terms of
interest rates, spreads between lending and deposit rates, and whether
service charges are competitively determine or regulated by government
or the central bank.

Indian banking system comprises of both organized & unorganized

banking includes indigenous bankers & village money-lenders. It
includes the following:

1. Reserve Bank of India (Central Bank)

2. Commercial Banks (Including Foreign Bank)
3. Development Bank
4. EXIM Bank
5. Co-operative Banks
6. Regional rural Banks
7. National Bank for Agriculture & Rural Development
(NABARD)
8. Land Development Banks

8
2.2. Banking in India:

Originated in the last decades of the 18th century. The first banks were
The General Bank of India, which started in 1786, and Bank of
Hindustan, which started in 1790; both are now defunct. The oldest
bank in existence in India is the State Bank of India, which originated in
the Bank of Calcutta in June 1806, which almost immediately became
the Bank of Bengal. This was one of the three presidency banks, the
other two being the Bank of Bombay and the Bank of Madras, all three of
which were established under charters from the British East India
Company. For many years the Presidency banks acted as quasi-central
banks, as did their successors. The three banks merged in 1921 to form
the Imperial Bank of India, which, upon India's independence, became
the State Bank of India.

9
 Bank institutions

1. Commercial 3 Co-operative
2 Regional rural
banks banks
banks

State co-operative
Private sector banks banks
Public sector banks

Central

A. Indian B.foreign Co-operative

A State Bank
Group
Primary credit
B Nationalized
societies
Banks

10
2.3 Co-operative Banks:

The Co-operative bank has a history of almost 100 years. The Co-
operative banks are an important constituent of the Indian Financial
System, judging by the role assigned to them, the expectations they are
supposed to fulfill, their number, and the number of offices they operate.
The co-operative movement originated in the West, but the importance
that such banks have assumed in India is rarely paralleled anywhere else
in the world. Their role in rural financing continues to be important even
today, and their business in the urban areas also has increased
phenomenally in recent years mainly due to the sharp increase in the
number of co-operative banks.

While the co-operative banks in rural areas mainly finance agricultural

based activities including farming, cattle, milk, hatchery, personal
finance etc. along with some small scale industries and self-employment
driven activities, the co-operative banks in urban areas mainly finance
various categories of people for self-employment, industries, small scale
units, home finance, consumer finance, personal finance, etc. Some of
the co-operative banks are quite forward looking and have developed
sufficient core competencies to challenge state and private sector banks.

According to NAFCUB the total deposits Banks & also the New Private
Sector Banks. This exponential growth of Co-operative Banks is
attributed mainly to their much better local reach, personal interaction
with customers, and their ability to catch the nerve of the local clientele.
Though registered under the Co-operative Societies Act of the Respective
States (where formed originally) the banking related activities of the co-

11
 operative banks are also regulated by the Reserve Bank of India. They
are governed by the Banking Regulations Act 1949 and Banking Laws
(Co-operative Societies) Act, 1965.

Some facts about Cooperative banks in India

Some cooperative banks in India are more forward than many of the
state and private sector banks.

According to NAFCUB the total deposits & lending of Cooperative Banks

in India is much more than Old Private Sector Banks & also the New
Private Sector Banks.

This exponential growth of Co operative Banks in India is attributed

mainly to their much better local reach, personal interaction with
customers, and their ability to catch the nerve of the local clientele.

2.4 Structure of co-operative bank:

Co-operative banking in India is federal in its structure. It is to be noted

that the word 'federal' means where an institute subordinates its power
authority. The State Co-operative Bank (SCB) which is also known as the
Apex Bank among the co-operatives functions at the state level. At the
district level, there is the District Central Co-operative Bank (DCCB) for
each district. At the base of the pyramid there are the Primary Credit
Societies or the Primary Agricultural Credit Societies (PACS) which cover
small towns and villages. Each higher level co- operative bank is a
federation of those below having membership and loan operations
restricted to their affiliated units.

12
 a Primary Co-
operative Bank

b Central Co-
operative Bank

c State Co-
operative Bank

13
 Primary Co-operative Banks or Credit Society (PCS):

The primary co-operative credit society is an association of borrows and

non-borrows residing in a particular locality. The funds of the society are
derived from the share capital and deposits of members and loans from
central co-operative banks. The borrowing power of the members as well
as of the society is fixed. The loans are given to members for the purpose
of cattle, folder fertilizer, pesticides, implements, etc.

Central Co-operative Banks (CCB):

There are the federations of primary credit societies in a district and are
of two types- those having a membership of primary societies only and
those having a membership of societies as well as individuals. The funds
of the bank consist of share capital, deposits and overdrafts from state
co-operative banks and joint stocks. These banks finance member
societies within the limits of the borrowing capacity of societies. They
also conduct all the business of a join-stock bank.

State Co- Operative Banks (SCB):

The state co-operative bank is a federation of central co-operative banks

and acts as a watchdog of the co-operative banking structure in the
state. Its funds are obtained from share capital from the Reserve Bank of
India. The state co-operative banks lend money to central co-operative
banks and primary societies and not directly to farmers. The principle
one being the institution of provincial co-operative banks to serve as
apex banks in the hierarchy of co-operative pyramid.

14
 (Under Control of Reserve Bank of India)

Reserve Bank of India

State Co-operative Bank

District Co-operative Urban Co-operative

Banks
Banks

Primary Co-operative
Societies Scheduled Non-
Scheduled
Co-operative
Co-operative
Bank
Banks

15
2.5 Seven Principle of co-operative bank:

1. Voluntary Association or Open Membership

The resolution of the congress point out, Membership of a co-operative
society should be voluntary and available without artificial restriction or
any social, political, racial or religious discrimination, to all persons who
can make use of its services and are willing the accept responsibilities of
membership.

2. Democratic control
The resolution of the congress point out, Co-operative societies is
democratic organizations. Their affair should be administration by
persons elected or appointed in a manner agreed by the members and
accountable to them Members of primary societies should enjoy equal
rights of voting (one member, one vote) and participation in decision
affecting their societies in other than primary societies the
administration should be conducted on a democratic basis in a suit? Old
from. The formulation of the principle of democratic management of co-
operative bodies has several implications.

3. Members Economic Participation

Members contribute equitably to and democratically control the capital of
their co-operatives. At least a part of that capital usually the co-
operatives. Members usually receive limited compensation, if any, on
capital subscribed a condition of membership. Members allocate
surpluses for any or all of the following purpose developing their co-
operative possibly by setting up reserves a part of which would be
indivisible benefiting members in portion their transactions with the co-
operative and supporting other activities approved by the membership.

16
4. Autonomy and Independence
Co-operative is Independence self help organizations controlled by their
member. If they enter into agreements with other organizations including
governments, or raise capital from external sources, they do so on terms
that ensure demo craft control by their member and maintain their co-
operative autonomy.

5. Co-operative Education, Training and Information

All co-operative societies should make provision for the education of their
member, officers, and of the general public, in the principles and
techniques of co-operation, both economical and democratic, so that they
can contribute effectively to the development of their co-operatives. They
inform the general public particularly young people and opinion leaders
about the natural and benefits of co-operation.

6. Mutuality or Co-operation among Co-operatives

All co-operative organization in order to best serve the interest s of their
member and their communities should actively cooperate in every
practical way with other co-operatives at local, national and international
levels. It noted that the process of concentration, and common action, to
reduce costs and expand business is gathering momentum in other
forms of organization.

7. Concern of Community
Co-operatives work for the sustainable development of their communitys
through policies approved by their members.

17
2.6 Function of Co-Operative bank:

Co-operative Banks are formed on the principle of Co-operative to Extend

Credit facilities to farmers and small scale industrial concerns and
promotes in general the habit of thrift and self help among the low and
middle income groups of the society.

Co-operative has been putting more weight on their lending activities

than on deposit mobilization.

The main function of Co-operative credit society was to provide cheap

credit to the members who are small people with small means and small
needs and finance.

The Co-operative Banks have a three tier set up. The state co-operative
bank, while central district co-operative banks function at the district
level and primary credit societies work of the village level.

Co-operative banks proceed on the principle of co-operation. CO-

operative Banks maintain the cash reserve and liquid assets in relation
to deposit only.

To arrange the programs regarding the Economic welfare of its members.

18
 Role of Co-operative Banks in India and its structure:

Co-operative banking came into vogue in India in 1904 when the first Co-
operative Credit Society Act was passed. The main function of a co-
operative Credit Society was to provide cheap credit to the members who
are small people with small means and small needs and finance. Another
object was to inculcate the saving habit among the agriculturists and
make them take advantage of co-operation from fellow members of the
society. We could bring green revolution in agriculture sector only due to
co-operative activities.

There is a state co-operative bank in each state co-operative as an apex

institution, advancing short term and medium term agriculture credit is
three tier one: a state co-operative bank (SCB) at an apex level in each
state, the at the district level and the primary and society (PCS) in the
village, and urban banks (UB) and other non-agricultural credit societies
(NACS) in cities and towns. The structure of co-operative banks.

As I discussed the co-operative societies came into existence when the

co-operative societies act, 1904 was enacted. These societies, however
could not mobilize enough resources as compared to the loans demanded
by its members. This led to the enactment a new act in 1912. The
various sections of this act are as follow:

A. To keep watch over the activities of the primary co-operative societies

and to assist them the required monetary help and them guidance
district central co-operative banks are established.

19
B. Establishing of non-leading societies along with the loan-giving (lending)
societies.
C. The difference between the village societies and urban societies is
removed and the type of societies maintain are only of two types.

(i) Societies having limited responsibility.

(ii) Societies having unlimited responsibilities.

In 1919, the Nontague Chemsford Act made co-operative societies and

banks co-operative society acts have been passed by all the state
government. From April 11966 the co-operative banks came under the
preview of banking lagh a paid up capital of Rs. 1 lakh or more have
come under the control of Reserve Bank of India. From above discussion,
we see that the co-operative banks in India have shown very good
progress since their establishment but in spite of showing very much
progress there still exists a number of defects in such co-operative
societies and banks. This has led qualitative improvement to suffer.

There are two main categories of the co-operative banks.

(a) Short term lending oriented co-operative Banks within this

category there are three sub categories of banks via state co-operative
banks, District co-operative banks and Primary Agricultural co-operative
societies.

(b) Long term lending oriented co-operative Banks within the second
category there are land development banks at three levels state level,
district level and village level.

20
2.7 Features of Co-operative Banks:

Co-operative Banks are organized and managed on the principal of co-

operation, self-help, and mutual help. They function with the rule of one
member, one vote. Function on no profit, no loss basis. Co-operative
banks, as a principle, do not pursue the goal of profit maximization. Co-
operative bank performs all the main banking functions of deposit
mobilization, supply of credit and provision of remittance facilities. Co-
operative Banks provide limited banking products and are functionally
specialists in agriculture related products. However, co-operative banks
now provide housing loans also.

UCBs provide working capital loans and term loan as well. The State Co-
operative Banks (SCBs), Central Co-operative Banks (CCBs) and Urban
Co-operative Banks (UCBs) can normally extend housing loans upto Rs 1
lakh to an individual. The scheduled UCBs, however, can lend upto Rs 3
lakh for housing purposes.

The UCBs can provide advances against shares and debentures also. Co-
operative bank do banking business mainly in the agriculture and rural
sector. However, UCBs, SCBs, and CCBs operate in semi urban, urban,
and metropolitan areas also.

The urban and non-agricultural business of these banks has grown over
the years. The co-operative banks demonstrate a shift from rural to
urban, while the commercial banks, from urban to rural. Co-operative
banks are perhaps the first government sponsored, government-

21
supported, and government-subsidized financial agency in India. They
get financial and other help from the Reserve Bank of India NABARD,
central government and state governments. They constitute the most
favored banking sector with risk of nationalization. For commercial
banks, the Reserve Bank of India is lender of last resort, but co-operative
banks it is the lender of first resort which provides financial resources in
the form of contribution to the initial capital (through state government),
working capital, refinance.

Co-operative Banks belong to the money market as well as to the capital

market. Primary agricultural credit societies provide short term and
medium term loans. Land Development Banks (LDBs) provide long-term
loans. SCBs and CCBs also provide both short term and term loans. Co-
operative banks are financial intermediaries only partially. The sources of
their funds (resources) are (a) central and state government, (b) the
Reserve Bank of India and NABARD, (c) other co-operative institutions,
(d) ownership funds and, (e) deposits or debenture issues. It is
interesting to note that intra-sectoral flows of funds are much greater in
co-operative banking than in commercial banking. Inter-bank deposits,
borrowings, and credit from a significant part of assets and liabilities of
co-operative banks. This means that intra-sectoral competition is absent
and intra-sectoral integration is high for co-operative bank.

Some co-operative banks are scheduled banks, while others are non-
scheduled banks. For instance, SCBs and some UCBs are scheduled
banks but other co-operative bank is non-scheduled banks. At present,
28 SCBs and 11 UCBs with Demand and Time Liabilities over Rs 50

22
Crore each included in the Second Schedule of the Reserve Bank of India
Act.

Co-operative Banks are subject to CRR and liquidity requirements as

other scheduled and non-scheduled banks are. However, their
requirements are less than commercial banks. Since 1966 the lending
and deposit rate of commercial banks have been directly regulated by the
Reserve Bank of India. Although the Reserve Bank of India had power to
regulate the rate co-operative bank but this have been exercised only
after 1979 in respect of non-agricultural advances they were free to
charge any rates at their discretion. Although the main aim of the co-
operative bank is to provide cheaper credit to their members and not to
maximize profits, they may access the money market to improve their
income so as to remain viable.

23
 CHAPTER.3

COMPANY PROFILE

24
3.1 Introduction:
The people in Saurashtra, located in western part of Gujarat, are always
depending upon the rain-fed cultivation. As a search for income
generation in an alternate way for their survival, they have chosen Surat
city, where there is a good scope for trade in Diamond and Textile sector.
Well off people have entered into the trading sector and the others on
labour front.

In a phased manner, the population of the people, involved in diamond

trade, belonging to Saurashtra increased to a sizeable extent in Surat
and in particular in the area of Varachha. It was become obvious for a
necessity of a Bank for their own people; the efforts were taken by a well
known philanthropist, story writer and columnist in local dailies, Mr. P.
B. Dhakecha, founder chairman of our Bank. As such, The Varachha
Cooperative Bank Ltd., came into existence on 16th October 1995 and
Inauguration ceremony was done by on the hand of Shree Swami
Sacchidanand. Some of our directors are belonging to diamond trade,
who are official site holders of getting rough block diamonds from foreign
countries. At the end of the first financial year the number of
shareholders was 4484, Share Capital 57.44 lacks, Deposits Rs.2.70
crores, Advance Rs.2.07 crores and profit stood at 4.77 lacks.

25
3.2 History:

THE VARACHHA COOPERATIVE BANK LTD:

The people in Saurashtra, located in western part of Gujarat, are always

depending upon the rain-fed cultivation. As a search for income
generation in an alternate way for their survival, they have chosen Surat
city, where there is a good scope for trade in Diamond and Textile sector.
Well off people have entered into the trading sector and the others on
labour front. In a phased manner, the population of the people, involved
in diamond trade, belonging to Saurashtra increased to a sizeable extent
in Surat and in particular in the area of Varachha. It was become
obvious for a necessity of a Bank for their own people; the efforts were
taken by a well known philanthropist, story writer and columnist in local
dailies, Mr. P. B. Dhakecha, founder chairman of our Bank. As such, The
Varachha Cooperative Bank Ltd., came into existence on 16th October
1995 and Inauguration ceremony was done by on the hand of Shree
Swami Sacchidanand. Some of our directors are belonging to diamond
trade, who are official site holders of getting rough block diamonds from
foreign countries. At the end of the first financial year the number of
shareholders was 4484, Share Capital 57.44 lacks, Deposits Rs.2.70
crores, Advance Rs.2.07 crores and profit stood at 4.77 lacks.

Our Bank has gradually developed the Banking activities and at the end
of 5th year, with a network of 5 branches, the share capital and reserves
raised to more than 8 crores and the deposits have crossed 100 crores
mark, which is a rare phenomenon in Cooperative Banking Sector in all
over India and the number of depositors have increased 58222. The
Bank has been awarded with First Prize for the best performance among
all Cooperative banks in Surat District during the FY.2000 - 01. At

26
 present the share capital and reserves raised to nearly 40 crores. The
deposit is Rs.160.70 crores Advances 78.21 crores. Total 7 branches and
130 staff members. In spite of run in a cooperative sector in the year
2001, due to Madhavpura episode, the Bank has not only survived but
also developed the base without any difficulty due to confidence reposed
upon by the public with our Bank.

We have introduced the system of quick delivery of vehicle loans, with

minimum papers and documents, without any hidden charges. Other
advances of our Bank have been spread over on the following categories:

Vehicle Loan
Loan against gold ornaments
Loan on personal guarantees (Surety Loan)
Retail trade business
Professional and Self employed
Loan against Banks own deposits/NSC
Cash credit hypothecation on stocks on trade
Technology Up gradation Finance (TUF) loan with subsidy

Besides the banking activity, the Bank has entered into the insurance
business arrangement with IFFCO-TOKIO. We are also having tie-up
arrangements with insurance companies on referral basis, as per RBI
guidelines. We have covered with accident insurance cover for the
shareholders, depositors and borrowers of the Bank and we have
received settlement to the tune of Rs.1 crores from the insurance

27
 companies. The data pertaining to our Bank is being sent to Reserve
Bank of India, banking regulator of the country, through e-Mail under
offsite surveillance system (OSS) for the past 3 years.

Our Bank has been fully computerized banking system, right from
inception and present programme, front end Visual Basic and the back
end (database) Oracle 10G Platform. We are having the staff members,
most of them belonging to younger generation, with energetic and
enthusiastic approach in Customer Service. The staff attendance is being
controlled under Biometric device system. CCTV system is being installed
to monitor the alertness of the entire banking activity, fitted with
cameras at the vital points. Our Bank has introduced Mobile Banking
and Any Branch Banking (ABB) in the year 2007. Our future plan is the
introduction of on and off site ATMs and Core Banking System.

Other vital factors of our Bank are as follows:

One of the leading cooperative Banks in South Gujarat

Audit grade, continuously at A, from the beginning
Any Branch Banking (ABB)
CCTV system is being installed to monitor the alertness of the entire
banking activity, fitted with cameras at the vital points.
Bank has started E-payment facility for the customers of the Bank for
the purpose of payment of Income-Tax.
Personalized Cheque Book is being issued to all the customers of the
Bank. - RTGS/NEFT facility is also available.

28
 Mobile Banking system to customers for getting various details about
their accounts like Current Balance, Cheque Return Status, FD Rates,
Loan Rates, Various Loan Schemes etc. by way of SMS.
Display/provision of VAT machine in Banking hall, for customers
approach
Strong working capital, Deposit base and our investment assets are
profit oriented
Net NPA continuously at zero percent
No default in CRR/SLR
Concurrent audit system
Implementation of Know Your Customer (KYC) policy
Teller system for payment up to Rs.20000 in CA and Rs.10000 in SB
Franking of adhesive stamp duty arranged by Revenue Dept. of Gujarat
State.

Besides banking, the Bank has done a little for some noble social cause,
by conducting blood donation camps. The bright wards of the
shareholders are being given with educational scholarship for their
future study.

With steady growth and strength, we are moving towards higher status in
the Banking arena and as well as in Cooperative Sector.

29
Vision and Mission of the Bank
Varachha Co-Operative Bank is Committed to satisfy its banking
customers, Share holders, employees and regulators through continually
improving banking services, innovation in products, technology up
gradation, knowledge of team work and strengthening customer
relationship.

Varachha Co-Operative Banks Vision (2010)

1. Banking customer through faster services and invocative products.

2. Share holder through regular dividend.
3. Regulators through higher rating during inspection audits.
4. Technically qualified staff to meet challenges of high-tech banking.
5. Inter branch connectivity.
6. Bankers presence in metros.
7. Introduction of full-fledged specialized branch.
8. No.1 Urban Co-operative Bank for business & profit per employee.

30
3.3 Social Contribution:

Arrange blood donation camps at regular interval time to time

On 2nd October 2008 Bank has arranged Mega Blood Donation Camp
and collected 2222 bottles of blood. Bank gives Rs.50000/- accident
insurance cover to all the blood donors.

Again on 2nd October 2009 Bank has arranged Mega Blood Donation
Camp and collected 3456 bottles of blood. Bank gives Rs.50000/-
accident insurance cover to all the blood donors.

Accident Insurance:

Bank has taken Group Insurance Policy every year for its valued Share
Holders and Customers for Rs.50000/- to Rs.300000/- [Depending upon
various accounts]. Under this service, insurance company paid
approximately Rs.1.25 Crore to its Share Holders and
Customers through bank.

Active Role in Samuh Lagna [Mass Marriage System]

Bank employees had actively participated and helpful in Mass Marriage

System organized by Saurashtra Patel Seva Samaj from time to time in
various ways.

31
3.4 Financial strength of varachha co-op bank ltd.

PTR. 31-3-07 31-3-08 31-3-09 31-3-10

Member 10,717 11,569 12,669 13,566

Share capital 4.31 4.63 5.24 5.91

Reserve & surplus 36.34 39.07 42.71 46.41

Deposite 162.97 168.27 171.57 224.16

Loans 73.26 80.23 92.03 94.89

Net profit 1.51 2.81 3.02 3.15

Working capital 208.38 221.15 226.96 320.38

Account holder 95,783 99,907 1,05,674 1,15,528

No. of loan taker 6,534 8,999 9215 7,739

Audit class A A A A

dividend 12% 12% 12% 12%

32
3.5 Award:
1. Surat Jilla Sahkari Sangh:

For the best co-op. bank in Surat dist for year 2000-2001.

2. Rastriya Vikas Rattan gold award:

From the international integration growth society, New Delhi.

3. The south Gujarat co-op banks association:

Award received from the south Gujarat co-op, banks association ltd,
Surat for the year 2007-2008

4. Best co-op bank in Surat dist:

For the year 2007-2008

5. Highest blood donation collection award:

Award received from Lok Samrpan Bank, Surat for highest blood
collection during the year 2008 in one camp.

33
CHAPTER.4

THEORETICAL
FRAMEWORK

34
4.1 What is Cash?

In common language cash refers to money in the physical form of

currency, such as banknotes and coins.

In book keeping and finance cash refers to current assets comprising

currency or currency equivalents that can be accessed immediately or
near-immediately (as in the case of money market accounts). Cash is
seen either as a reserve for payments, in case of a structural or
incidental negative cash flow or as a way to avoid a downturn on
financial markets.

Your available cash includes:

coins and notes

money in current accounts and short-term deposits
any unused bank overdraft facility
foreign currency and deposits that can be quickly converted to your
currency

It does not include:

long-term deposits (if these cannot be withdrawn)

money owed by customers
stock

35
 Cash flow:

Cash flow is the money that is moving (flowing) in and out of your
business in a month. Here is how cash flow works:

Cash is coming in from customers or clients who are buying your

products or services. If customers don't pay at time of purchase, some of
your cash flow is coming from collections of accounts receivable.

Cash is going out of your business in the form of payments for expenses,
like rent or a mortgage, in monthly loan payments, and in payments for
taxes and other accounts payable.

Think of 'cash flow' as a picture of your checking account. If more money

is coming in than is going out, you are in a "positive cash flow" situation
and you have enough to pay your bills. If more cash is going out than
coming in, you are in danger of being overdrawn, and you will need to
find money to cover your overdrafts. This is why new businesses typically
need working capital, in the form of a loan or line of credit, to cover
shortages in cash flow.

36
4.2 Four Steps to a Healthy Cash Flow:

Healthy cash flow is essential to the success of a small business. You

may have the best service or product around, your employees and
customers may love you, your office may be well organized, but if you
dont have the money to buy inventory or pay bills, you cant keep your
business running. Many business owners make the mistake of believing
cash flow is largely out of their control. On the contrary, the following
steps can really help

1. Analyze your financial condition:

Financial analysts, credit providers and knowledgeable investors rely

heavily on financial ratios to judge the health of a company. You should
use these tools as well. Commonly used ratios can help you analyze your
pricing strategy, level of overhead, liquidity, the health of your cash flow,
your average collection period, the appropriateness of your collection
terms and your inventory turnover rate.

2. Improve your cash management:

When it comes to the cash flowing through your financial accounts, your
goals should be to ensure that incoming funds spend as much time as
possible earning interest or dividends for your benefit and that outgoing
funds are available when needed. With a traditional business checking
account, meeting these seemingly simple goals can be a complex task.
You will have to move funds manually into a separate money market
account in order to earn interest or dividend income and back into your
checking account to cover disbursements when due.

37
 An alternative is a central asset account, which combines traditional
checking features, investment and borrowing into a single account. A
central asset account saves you time and effort by automatically putting
your cash where it needs to be, when it needs to be there. And by
keeping your cash in interest-bearing accounts right up until the
moment disbursements clear your account, a central asset account can
also help increase your return and your bottom line.

3. Even out temporary fluctuations:

No matter how efficiently you manage your cash flow; there may be times
when your business needs more money than it has on hand. This is why
adequate credit resources are essential. A business line of credit is useful
and convenient because it can be used as needed, paid down and reused
without reapplying. When a line of credit is integrated with a central
asset account, credit is automatically accessed when needed. And
incoming funds automatically go to pay down your loan balance,
reducing borrowing time and interest expense.

4. Invest surplus cash:

Although part of your business capital needs to be liquid, most

businesses have some capital that can be invested in short- and
intermediate-term securities for potentially higher yields. A broad array
of investments can be purchased within a central asset account. And you
can sell securities in your account at any time, or, if appropriate, borrow
against their value, to meet working capital needs. Be sure to discuss the
risks of borrowing against your securities with your Business Financial
Advisor.

38
 Todays business environment changes rapidly, and as a business owner,
you need to regularly review your cash flow and cash management
policies to ensure that they are helping to keep your business
competitive.

4.3 Cash management:

Cash management is a broad area having to do with the collection,

concentration, and disbursement of cash including measuring the level
of liquidity, managing the cash balance, and short-term investments.

If at any time, because of a lack of cash, a corporation fails to pay an

obligation when it is due, the corporation is insolvent. Insolvency is the
primary reason firms go bankrupt. Obviously, the prospect of such dire
consequence compels companies to manage their cash with care.
Moreover, efficient cash management means more than just preventing
bankruptcy. It improves the profitability and reduces the risk the firm is
exposed to.

39
 Purpose of Cash Management

Cash management is the stewardship or proper use of an entitys cash

resources. It serves as the means to keep an organization functioning by
making the best use of cash or liquid resources of the organization.

1. To eliminate idle cash balances. Every rupee held as cash rather than
used to augment revenues or decrease expenditures represents a lost
opportunity. Funds that are not needed to cover expected transactions
can be used to buy back outstanding debt (and cease a flow of funds out
of the Treasury for interest payments) or can be invested to generate a
flow of funds into the Treasurys account. Minimizing idle cash balances
requires accurate information about expected receipts and likely
disbursements.

2. To deposit collections timely. Having funds in-hand is better than having

accounts receivable. The cash is easier to convert immediately into value
or goods. A receivable, an item to be converted in the future, often is
subject to a transaction delay or a depreciation of value. Once funds are
due to the Government, they should be converted to cash-in-hand
immediately and deposited in the Treasury's account as soon as possible.

3. To properly time disbursements. Some payments must be made on a

specified or legal date, such as Social Security payments. For such
payments, there is no cash management decision. For other payments,
such as vendor payments, discretion in timing is possible. Government
vendors face the same cash management needs as the Government. They

40
 want to accelerate collections. One way vendors can do this is to offer
discount terms for timely payment for goods sold.

4.4 Cash Management Service Generally Offered By Bank

He following is a list of services generally offered by banks and Utilized by

larger businesses and corporations:

1. Account Reconcilement Services:

Balancing a chequebook can be a difficult process for a very large

business, since it issues so many cheques it can take a lot of human
monitoring to understand which cheques have not cleared and therefore
what the company's true balance is. To address this, banks have
developed a system which allows companies to upload a list of all the
cheques that they issue on a daily basis, so that at the end of the month
the bank statement will show not only which cheques have cleared, but
also which have not. More recently, banks have used this system to
prevent checks from being fraudulently cashed if they are not on the list,
a process known as positive pay.

2. Advanced Web Services:

Most banks have an Internet-based system which is more advanced than

the one available to consumers. This enables managers to create and
authorize special internal logon credentials, allowing employees to send
wires and access other cash management features normally not found on
the consumer web site.

41
3. Automated Clearing House:

Service is usually offered by the cash management division of a bank.

The Automated Clearing House is an electronic system used to transfer
funds between banks. Companies use this to pay others, especially
employees (this is how direct deposit works). Certain companies also use
it to collect funds from customers (this is generally how automatic
payment plans work). This system is criticized by some consumer
advocacy groups; because under this system banks assume that the
company initiating the debit is correct until proven otherwise.

4. Balance Reporting Services:

Corporate clients who actively manage their cash balances usually

subscribe to secure web-based reporting of their account and transaction
information at their lead bank. These sophisticated compilations of
banking activity may include balances in foreign currencies, as well as
those at other banks. They include information on cash positions as well
as 'float' (e.g., checks in the process of collection). Finally, they offer
transaction-specific details on all forms of payment activity, including
deposits, checks, and wire transfers in and out, ACH (automated
clearinghouse debits and credits), investments, etc.

5. Cash Concentration Services:

Large or national chain retailers often are in areas where their primary
bank does not have branches. Therefore, they open bank accounts at
various local banks in the area. To prevent funds in these accounts from
being idle and not earning sufficient interest, many of these companies

42
 have an agreement set with their primary bank, whereby their primary
bank uses the Automated Clearing House to electronically "pull" the
money from these banks into a single interest-bearing bank account.

6. Lockbox - Retail:

services: Often companies (such as utilities) which receive a large

number of payments via checks in the mail have the bank set up a post
office box for them, open their mail, and deposit any checks found. This
is referred to as a "lockbox" service.

7. Lockbox - Wholesale:

Services are for companies with small numbers of payments, sometimes

with detailed requirements for processing. This might be a company like
a dentist's office or small manufacturing company.

8. Positive Pay:

Positive pay is a service whereby the company electronically shares its

check register of all written checks with the bank. The bank therefore
will only pay checks listed in that register, with exactly the same
specifications as listed in the register (amount, payee, serial number,
etc.). This system dramatically reduces check fraud.

43
9. Reverse Positive Pay:

Reverse positive pay is similar to positive pay, but the process is

reversed, with the company, not the bank, maintaining the list of checks
issued. When checks are presented for payment and clear through the
Federal Reserve System, the Federal Reserve prepares a file of the
checks' account numbers, serial numbers, and dollar amounts and
sends the file to the bank. In reverse positive pay, the bank sends that
file to the company, where the company compares the information to its
internal records. The company lets the bank know which checks match
its internal information, and the bank pays those items. The bank then
researches the checks that do not match, corrects any misreads or
encoding errors, and determines if any items are fraudulent. The bank
pays only "true" exceptions, that is, those that can be reconciled with the
company's files.

Sweep accounts are typically offered by the cash management division of

a bank. Under this system, excess funds from a company's bank
accounts are automatically moved into a money market mutual fund
overnight, and then moved back the next morning. This allows them to
earn interest overnight. This is the primary use of money market mutual
funds.

10. Zero Balance Accounting:

Can be thought of as some what of a hack. Companies with large

numbers of stores or locations can very often be confused if all those
stores are depositing into a single bank account. Traditionally, it would
be impossible to know which deposits were from which stores without
44
 seeking to view images of those deposits. To help correct this problem,
banks developed a system where each store is given their own bank
account, but all the money deposited into the individual store accounts
are automatically moved or swept into the company's main bank
account. This allows the company to look at individual statements for
each store. Banks are almost all converting their systems so that
companies can tell which store made a particular deposit, even if these
deposits are all deposited into a single account. Therefore, zero balance
accounting is being used less frequently.

11. Wire Transfer:

A wire transfer is an electronic transfer of funds. Wire transfers can be

done by a simple bank account transfer, or by a transfer of cash at a
cash office. Bank wire transfers are often the most expedient method for
transferring funds between bank accounts. A bank wire transfer is a
message to the receiving bank requesting them to effect payment in
accordance with the instructions given. The message also includes
settlement instructions. The actual wire transfer itself is virtually
instantaneous, requiring no longer for transmission than a telephone
call.

45
4.5 Collection and Disbursement:

Cash collection systems aim to reduce the time it takes to collect the
cash that is owed to the bank (for example, from its customers). The time
delays are categorized as mail float, processing float, and bank float.
Obviously, an envelope mailed by a customer containing payment to a
supplier firm does not arrive at its destination instantly. Likewise, the
moment the firm receives payment it is not deposited in its bank
account. And finally, when the payment is deposited in the bank account
oftentimes the bank does not give immediate availability to the funds.
These three "floats" are time delays that add up quickly, requiring the
firm in the meantime to find cash elsewhere to pay its bills.

Cash management attempts to decrease the time delays in collection at

the lowest cost. A collection receipt point closer to the customer, with an
outside third-party vendor to receive, process, and deposit the payment
(cheques) will speed up the collection.

For example, if a firm collects 10 million each day and can permanently
speed up collections by five days, at 6 percent interest rates, then annual
before-tax profits would increase by 3 million. The techniques to analyze
this case would utilize data involving where the customers were; how
much and how often they pay; the bank they remit checks from; the
collection sites the firm has (their own or a third-party vendor); the costs
of processing payments; the time delays involved for mail, processing,
and banking; and the prevailing interest rate that can be earned on
excess funds.

46
 Once the money has been collected, most firms then proceed to
concentrate the cash into one center. The rationale for such a move is to
have complete control of the cash and to provide greater investment
opportunities with larger sums of money available as surplus. There are
numerous mechanisms that can be employed to concentrate the cash,
such as wire transfers, automated clearinghouse transfers, and cheques.
The tradeoff is between cost and time.

Disbursement is the opposite of collection. Here, the firm strives to slow

down payments. It wants to increase mail delays and bank delays, and it
has no control over processing delay.

4.6 Optimal Cash Balance:

Another aspect of cash management knows the optimal cash balance.

There are a number of methods that try to determine the magical cash
balance, which should be targeted so that costs are minimized and yet
adequate liquidity exists to ensure bills are paid on time (hopefully with
something left over for emergency purposes). One of the first steps in
managing the cash balance is measuring liquidity.

There are numerous ways to measure this, including: cash to total assets
ratio, current ratio (current assets divided by current liabilities), quick
ratio (current assets less inventory, divided by current liabilities), and the
net liquid balance (cash plus marketable securities less short-term notes
payable, divided by total assets). The higher the number generated by the
liquidity measure, the greater the liquidity and vice versa. There is a

47
 trade off, however, between liquidity and profitability that discourages
firms from having excessive liquidity.

Optimum Utilization of Operating Cash

Implementation of a sound cash management programme is based on
rapid generation, efficient utilization and effective conversation of its
cash resources. Cash flow is a circle. The quantum and speed of the flow
can be regulated through prudent financial planning facilitating the
running of business with the minimum cash balance. This can be
achieved by making a proper analysis of operative cash flow cycle along
with efficient management of working capital.

Cash Forecasting
Cash forecasting is backbone of cash planning. It forewarns a business
regarding expected cash problems, which it may encounter, thus
assisting it to regulate further cash flow movements. Lack of cash
planning results in spasmodic cash flows.

Cash Management Techniques:

Every business is interested in accelerating its cash collections and
decelerating cash payments so as to exploit its scarce cash resources to
the maximum. There are techniques in the cash management which a
business to achieve this objective.

48
 Liquidity Analysis:
The importance of liquidity in a business cannot be over emphasized. If
one does the autopsies of the businesses that failed, he would find that
the major reason for the failure was their inability to remain liquid.
Liquidity has an intimate relationship with efficient utilization of cash. It
helps in the attainment of optimum level of liquidity.

Profitable Deployment of Surplus Funds

Due to non-synchronization of ash inflows and cash outflows the surplus
cash may arise at certain points of time. If this cash surplus is deployed
judiciously cash management will itself become a profit centre. However,
much depends on the quantum of cash surplus and acceptability of
market for its short-term investments.

Economical Borrowings
Another product of non-synchronization of cash inflows and cash
outflows is emergence of deficits at various points of time. A business
has to raise funds to the extent and for the period of deficits. Raising of
funds at minimum cost is one of the important facets of cash
management.

49
4.7 Controlled Disbursement:

This is another product offered by banks under Cash Management

Services. The bank provides a daily report, typically early in the day, that
provides the amount of disbursements that will be charged to the
customer's account. This early knowledge of daily funds requirement
allows the customer to invest any surplus in intraday investment
opportunities, typically money market investments. This is different from
delayed disbursements, where payments are issued through a remote
branch of a bank and customer is able to delay the payment due to
increased float time.

In the past, other services have been offered the usefulness of which has
diminished with the rise of the Internet. For example, companies could
have daily faxes of their most recent transactions or be sent CD-ROMs of
images of their cashed checks.

Cash management services can be costly but usually the cost to a

company is outweighed by the benefits: cost savings, accuracy,
efficiencies, etc.

50
4.8 Short term investment decision:

A key cash management problem (including how much money and for
how long) concerns in which money market instruments should the
temporary excess funds be placed. This short-term investment decision
necessitates the analysis of return (need to annualize returns in order to
compare) and liquidity. Only short-term investments meet the liquidity
test, as long-duration instruments expose the investor to too much
interest rate risk. In addition, federal government obligations are popular
due to the absence of default risk and ease of resale in the secondary
market. Nonetheless, there are numerous money market securities
available with varying characteristics from many types of issuers.

Cash management is evolving with the increasing acceptance and use of

electronic payments, such as debit cards. Shifting from paper-based
payments to electronic transfers reduces the uncertainty in cash flow
forecasting. The change in form of payment decreases both float and per
item transaction costs. Stumbling blocks to the complete switchover to
electronic payments include the initial equipment investment for
businesses and resistance by consumers who still prefer cheques.
Nevertheless, the use of electronic versus paper payments is gaining,
affecting the importance of current cash management techniques.

51
 CRR (Cash Reserve Ratio) With RBI of India

The capacity of credit creation of bank is depending upon their cash flow
received to restrict this credit creation, the reserve bank of India has
directed their term in cash of scheduled banks and sec.18 of banking
regulation act are required to maintain the cash reserve ratio @4.75%
and non-scheduled bank @3% to 6% of their demand and time liability
amount separately. The scheduled bank are required to deposit the cash
reserve ratio amount with RBI of India while the non-scheduled banks
are required to maintain separate account for this. The RBI of India is
also empowered to raise the cash reserve ratio up to 15% only in respect
of scheduled banks. It is maintained reported to RBI every for night.
Time liability is related with time like, fixed deposit Demand liability
is related with the demand like, current deposit, inoperative deposit, and
matured fixed deposits.

SLR (Statutory Liquidity Ratio)

The cash flow for regular banking transaction mainly depends upon
deposit received in the bank. The RBI of India there for puts some
restriction on utilization of these amounts. The scheduled and-scheduled
banks are required to deposit 25% amount of their demand and time
liability amount in the security are converted into cash and therefore
they are termed as liquid asset and 25% amount termed as liquid
ratio. The RBI of India is empowered to raise this liquidity ratio from
25% to 40%. It is maintained average fortnight and reported to RBI.

52
4.9 Advantage of cash management:

1. The availability of cash may be a matter of life or death. A sufficiency of

cash can keep an unsuccessful firm going despite losses. This
insufficiency can bring failure in the face of actual or prospective earning.

2. An efficient cash management may enable a firm to obtain optimum

working capital and ease the strains of cash shortage.

3. The first priority on any business is survival and this can not be assures,
even in the short run, unless a company remains both liquid and
solvent, unless it is able to pay its debts as and when they fall due, both
immediately and in the foreseeable future.

4. It gives an inventory of the financial reserve which is available at the

time of recession.

5. It views the problems of dynamic over the period of time.

6. It yields plan as an integral part of procedures.

7. Cash management involves balance sheet changes and other cash flow
that do not appear in the profit and loss account such as capital
expenditure.

53
4.10 Disadvantage of cash management:

1. It may offer a solution for compensation which is not justified on the

basis of a concrete notion particular when the business economy
operates is an uncertain world.

2. It considers the recession as the main sources of uncertainty but ignores

technological developments, shift in consumer preference etc. moreover
recession are not only sources of economic unhappiness.

3. The cost of holding cash is the profit that could have been earned had the
funds been put to another use.

4. Financial distress usually is a matter of degree, while the declaration of

bankruptcy is an extreme form, cost of financial are thus related to
modifications in investment and financial strategies made necessary by
the condition of distress.

54
 CHAPTER.5

LITERATURE REVIEW

55
1 Leire San Jose, Txomin Iturralde, Amaia Maseda (2008) on the
research topic of Treasury Management Versus Cash Management they
were concluded that The firms interviewed have a positive view of the
most important responsibilities of cash management, and specifically
stress the importance of monitoring and optimization of the sales-cash
circuit and the drawing up of short-term treasury forecasts, at least
monthly.

2.Cash Management Monitor Survey (2000), on the topic of Cash

Management Trends for a New Century make conclusion that The cash
management business is being driven by technology and relationships,
Measure the quality of cash management services being provided,
Measure current cash management product usage, Quantify buyer
attitudes towards pricing of cash management services, Determine
company plans and intentions for current banking relationships, product
purchases, and Cash management projects over the next year.

3. Robert Ferstl, Alex Weissen Steiner (2006), on the topic of cash

management they were says that cash management is helpful to risk
aversion of the company, initial holdings in cash and bonds future cash
inflows (external but also coupons on held bonds) and outflows
(liabilities) transaction costs uncertainty of future short-term interest
rate.

4. Mr. Avanish Mehra (2005), on the topic of web based cash

management he was conclude that financial web-based cash
management. Service to business, ranging from small enterprise to large
corporate house built on new generation industry standard. Technology
.j2ee and .net the modular solution provides corporate customers any
time, any where access to real time, consolidated information. it manage

56
 cash positions and electronically sends, and receive funds in a secure
manner , within and across border.

5. Mr. Jill Andresh Frasers (17, Oct 2000) on the research topic the art
of cash management he was conclude that the forecasting your business
cash needs and learning how to handled cash crises.

6. This literature review is given by M.B.A a student Milin Desai from C.K.
Pithawala institute of management (2009) he was research on the
topic of cash management. And he was concluding that an efficient
cash management may enable a firm to obtain optimum working capital
and ease the strains of cash shortage. The more cash which is on hand,
the easier it will be for the company to meet its bills.

7. This review is given by Larsson (2000) on the topic of cash

management he said that the efficiency in to the value chain can be
improved. if organization control and perhaps adjust their financial
routine one part of an organization, financial routine with great potential,
but which often is neglected, are organization managing their liquid
capital, or cash management .

8. This literature review is given by V. V. Gopal (2004) on the topic of

corporate cash management to benefits from electronic payment the
new electronic payment product and service offers the corporate clients
an improved bottom line by helping manage cash requirements. Several
of the trends in cash flow forecasting favor the use of electronic payment
products available. Improved technology and systems integration makes
in more attractive to use e-payment because these method of payment
can be incorporated in to firm-wide computing systems.

57
 CHAPTER.6

RESEARCH
METHODOLOGY

58
6.1 Need and significance of study:

Cash management is a broad term that covers a number of function that

help individuals and businesses process receipts and payment in an
organized and efficient manner.

So, this study has been undertaken to find how one company manage its
cash management. This study has been undertaken using simple
statistical tool.

6.2 Research problem statement:

Cash management of Varachha co-op bank

6.3 Research objective:

Primary objective:

To know about the cash management of Varachha bank.

To analyze financial position of bank.

Secondary objective:

To study whole system of cash inflow and cash outflow in an

organization.
To know the liquidity level of bank.

To study inflow of cash for corporate requirements.

59
6.4 Research variable under study:

Cash inflow
Cash outflow

6.5 Research design:

Research design constitutes the blue prints for the collection,

measurement and analyze of data. It also expresses both structure of
research problem-the frame work, organization, or configuration of the
relationship among variable of the study and plan of investigation used
to obtain empirical evidence on those relationship.

6.6 Type of research design:

The topic which I had taken is need revised study. It is done only
through exploratory study.

Exploratory study is used to explore of current situation. In this study

clarification of the specific problem is define. Exploratory study gives the
answer the question that how I come to know about the problem
statement.

6.7 Data collection method:

Here for my project I have used secondary data only as the analysis is to
carried down for bank on the basis of the past data which were
published by bank it self.

60
6.8 Tool used for data collection:

I have used to Ratio analysis. It is an important and age old technique of

financial analysis. Ratios are relative form of financial data and very
useful technique to check upon the efficiency of firm. Some ratios
indicate trend or progress or downfall of the firm.

6.9 Limitation of study:

The time period of the research is limited and hence a through research
could not be done.
People were reluctant to go in to details because of their busy schedules.

61
 CHAPTER.7

DATA ANAYLSIS

62
Cash Ratio:

cash in hand & at bank

cash ratio = *100
total deposit

57,49,38,818.3
2010= *100 = 27.30%
210,56,09,070.44

32,54,82,408.9
2009= *100 = 20.22%
160.89,12,025.01

39,20,93,474.7
2008= *100 =25.30%
154,93,80,006.41

Cash Ratio
30.00% 27.30%
25.30%
25.00%
20.22%
Percentage

20.00%
15.00%
10.00%
5.00%
0.00%
2008 2009 2010
Year

Interpretation: from the cash ratio it is easy to know that out of total
deposite banks get from public what percentage bank keep as cash in
hand and cash at other bank.its for liquidity.and balance for day to day
requirement.in 08-10 are 25.30%, 20.22% and 27.30%.

63
Growth in Capital:

31,35,200
2008= 100 =7.27%
431,21,300

61,58,500
2009 = 100 =13.31%
462,56,500

67,17,500
2010= 100 =12.81%
524,15,000

Growth in Capital
14.00%
12.00%
Percentage

10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2008 2009 2010
Year

Interpretation: from these ratio we can know about the growth rate of
capital.if the growth of capital increase that is good for bank.in these
chart the growth of capital is increase than the past years.that is in 08-
10, it is 7.27%, 13.21%, 12.81%.

64
Net Profit to Total Deposite:

Net Profit
=
Total Deposite

281,43,605.51
2008= *100 =1.81%
154,93,80,006.41

302,24,486.70
2009= *100 =1.87%
160,89,12,025.01

314,80,142.45
2010= *100 =1.49%
210,56,09,070.28

Net profit to total deposite

2.00% 1.81% 1.87%
1.49%
Percentage

1.50%

1.00%

0.50%

0.00%
2008 2009 2010
Year

Interpretation: this ratio shows the bank earn net profit against the
total deposite, in this chart the growth is decrease that is not good for the
bank.in the 2008, its is 1.81%, in 2009, its is 1.87% and in 2010, its is
1.49%.

65
Net profit to average working capital:

Net Profit
=
Average Working Capital

2.81
2008 = *100 =1.30%
214.76

3.02
2009 = *100 =1.34%
224.055

3.14
2010 = *100 =1.14%
273.67

Net profit to average working capital

1.40%
1.35% 1.34%
1.30%
1.30%
Percentage

1.25%
1.20%
1.14%
1.15%
1.10%
1.05%
1.00%
2008 2009 2010
Year

Interpretation: this ratio shows the net profit against the average
working capital. In this ratio the growth of net profit to average working
capital decrease in 2010.that is not good for the company. In 2008, it is
1.30%. In 2009 its a 1.34% and in 2010 its a 1.14%

66
Loan deposits ratio

Loans
= * 100
Deposits

80,22,85,564.04
07-08 = * 100 = 47.68%
1,68,26,85,718.41

92,03,17,180.48
08-09 = * 100 = 53.64%
1,71,57,49,083.01

94,88,66,832.2
09-10 = *100 =42.32%
2,24,16,52,540

Loan deposits ratio

60.00% 53.64%
50.00% 47.68%
42.32%
Percentage

40.00%
30.00%
20.00%
10.00%
0.00%
2008 2009 2010
Year

Interpretation: This ratio a comparison of funds generation and its

funds mobilization indicates the total loans sanctioned by bank in
relation total amount of money deposited with the bank. As per ratio
bank has grow over the year in 08-09,its a 47.68%, 08-09 it is 53.64%
and in 09-10 it is decrease that is 42.32%.

67
Loan to assets ratio

Loans
=
Total Assets
*100

80,22,85,564
07-08 = *100 =36.84%
2,17,73,65,169.30

92,03,17,180.5
08-09 = *100 =40.55%
2,26,90,56,555.14

94,88,66,832.2
09-10 = *100 =32.90%
2,88,35,47,600.66

Loan to assets ratio

45.00% 40.55%
40.00% 36.84% 32.90%
35.00%
Percentage

30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2008 2009 2010
Year

Interpretation: The higher ratio indicates a bank is loaned up and its

liquidity is low. Higher the ratio, the more risky a bank may be to higher
defaults. As the ratio is high it is not good for bank and collection activity
should be increase maintain the liquidity. Banks current liquidity is
increase. In 07-08 it is 36.84%, 08-09 its a 40.55% and 09-10 is
32.90%.

68
Interest expense to interest income

Interest Expense
= *100
Interest Income

7,35,66,402
07-08 = * 100 = 44.49%
16,53,54,038.5

7,84,47,319.29
08-09 = * 100 =43.41%
18,07,32,770.28

9,44,99,998.76
09-10 = *100 = 47.30%
19,97,72,678.97

Interest expense to interest income

48.00%
47.30%
47.00%
Percentage

46.00%
45.00% 44.39%
44.00%
43.31%
43.00%
42.00%
41.00%
2008 2009 2010
Year

Interpretation: This ratio show the picture of interest paid and interest
earned for the period. Interest paid is decreasing over the year and then
increase. In 07-08 it is 44.49%, 08-09 it is 43.41% and in 09-10 it is
47.30%.

69
 Other Income
Other income to total income = *100
Total Income

1,05,32,639.55
07-08 = *100 = 5.61%
18,74,93,170.5

93,91,392.22
08-09 = *100 = 4.71%
1992,78,464.1

1,34,48,792.93
09-10 = *100 = 6.20%
21,66,49,615.3

other income to total income

7.00% 6.20%
6.00% 5.61%
Percentage

4.71%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
2008 2009 2010
Year

Interpretation: this ratio gives the sign of part other income in the total
income around 5% to 6% are the other income in the total income. So the
bank is earning a part from the interest income. In 2007-2008, it is
5.61% 2008-2009, it is 4.71% and in 2009-2010, it is 6.20%.

70
Profit margin ratio:

Net Profit
= *100
Total Income

2,81,43,605
07-08 = *100 =15.01%
18,74,93,170

3,02,24,486
08-09 = *100 =15.16%
19,92,78,464

3,14,80,142
09-10= *100 =14.52%
21,66,49,615

Profit margin ratio

15.40%

15.20% 15.16%
Percentage

15.01%
15.00%

14.80%

14.60% 14.52%
14.40%

14.20%
2008 2009 2010
Year

Interpretation: Generally this ratio is required under 14 to 20%. If this

ratio is higher than 15% that means it is good for bank. In 2008, it is
15.01% in 2009, it is 15.16% and in 2010, it is 14.52%.

71
Growth Ratio of Varachha bank
Growth in Capital:

31,35,200
2008= 100 = 7.27%
4,31,21,300

61,58,500
2009= 100 = 13.31%
4,62,56,500

67,17,500
2010= 100 = 12.81%
5,24,15,000

Growth in Capital
14.00% 13.31% 12.81%
12.00%
Percentage

10.00%
8.00% 7.27%
6.00%
4.00%
2.00%
0.00%
2008 2009 2010
Year

Interpretation: from these ratio we can know about the growth rate of
capital.if the growth of capital increase that is good for bank.in these
chart the growth of capital is increase than the past years.that is in 08-
10, it is 7.27%, 13.21%, 12.81%.

72
Growth in Reserve and Surplus:

1,16,97,208
2010= 100 =5.47%
21,36,34,807.2

1,14,89,107.13
2009= *100 =5.68%
20,21,45,700.1

1,44,85,465.49
2008= * 100 =7.71%
18,76,60,234.6

Reserve & Surplus

5.00%
4.30%
4.00% 3.50%
Percentage

3.00%
2.50%
2.00%

1.00%

0.00%
2008 2009 2010
Year

Interpretation: from these ratio we can know about the growth rate of
reserve and surplus of the bank.if the growth of reserve and surplus
increase that is good for bank.in these chart the growth of capital is
increase than the past years.that is in 08, it is 4.30%, in 09, it is 2.50%
and in 10, it is 3.50%.

73
Growth in current a/c deposite:

13,71,83,249.7
2010= *100 =32.83%
41,77,62,957.8

82,01,724.9
2009= *100 = -1.92%
42,59,64,682.7

1,23,66,654.45
2008= *100 =2.99%
41,35,98,028.2

Growth in current a/c deposite

40.00%
32.83%
30.00%
Percentage

20.00%

10.00%
2.99% -1.92%
0.00%
2008 2009 2010
-10.00%
Year

Interpretation: This ratio show the growth rate of current a/c

deposite,with the current a/c deposite banks earn more money from
customer, bank use these money for short term use.in these chart
growth ratio of 08, its is 2.99%, in 09, its is -1.92% and in 10, its is
32.83%.

74
Growth in saving a/c deposite:

9,31,40,689.64
2008= 100 =16.77%
5,55,25,2307.1

36291680.5
2009= 100 =-5.59%
648392996.8

147969233
2010= *100 =24.17%
612101316.3

Growth in saving a/c deposite

30.00%
25.00% 24.17%
Percentage

20.00%
16.77%
15.00%
10.00%
5.59%
5.00%
0.00%
2008 2009 2010
Year

Interpretation: This ratio show the growth rate of saving a/c

deposite,with the saving a/c deposite banks earn more money from
customer, bank use these money for short period.in these chart growth
ratio of 08, its is 16.77%, in 09, its is 5.59% and in 10, its is 24.17%.

75
Growth in fixed deposits:

1,39,74,650
2008= *100 =-2.85%
48,89,96,977

10,40,25,424
2009= *100 =21.89%
47,50,22,377

21,15,44,562.6
2010= *100 =36.53%
57,10,47,751

Growth in fixed depositsS

40.00% 36.53%
35.00%
Percentage

30.00%
25.00% 21.89%
20.00%
15.00%
10.00%
5.00% 2.85%
0.00%
2008 2009 2010
Year

Interpretation: This ratio show the growth rate of fixed a/c

deposite,with the fixed a/c deposite banks earn more money from
customer, bank use these money for long term use.in these chart growth
ratio of 08, its is 2.85%, in 09, its is 21.89% and in 10, its is 36.53%.

76
Other liability:

6,78,961.79
2008= *100 =2.378%
2,85,40,155.87

1,06,13,074.04
2009= *100 =36.32%
2,92,19,117.66

3,90,35,818
2010= *100 =98%
3,98,32,191.7

Other liability
120.00%
98%
100.00%
Percentage

80.00%
60.00%
40.00% 36.32%

20.00%
2.38%
0.00%
2008 2009 2010
Year

Interpretation: This ratio show the growth rate other liability, in this
ratio the other liability is increases that is not good for bank. In these
chart growth ratio of 08, its is 2.38%, in 09, its is 36.32% and in 10, its
is 98%.

77
Growth in working capital:

12.77
2008= *100 =6.128%
208.38

5.81
2009= *100 =2.62%
221.15

93.43
2010= *100 =41.46%
226.96

Growth in working capital

45.00%
41.46%
40.00%
35.00%
Percentage

30.00%
25.00%
20.00%
15.00%
10.00%
6.13%
5.00% 2.62%
0.00%
2008 2009 2010
Year

Interpretation: This ratio show the growth in working capital of the

bank, in this ratio the growth in working capital is increases that is good
for bank. With use of more working capital bank can increase there
profite. In these chart growth ratio of 08, its is 6.13%, in 09, its is 2.62%
and in 10, its is 41.46%.

78
Growth in investment:

83,50,55,100
2008 = *100 = 0%
83,50,55,100

6,00,00,000
2009 = *100 =-7.81%
83,50,55,100

40,44,47,922
2010= *100 =52.18%
77,50,55,100

Growth in investment
60%
52.18%
50%
Percentage

40%

30%

20%

10% 7.81%
0%
0%
2008 2009 2010
Year

Interpretation: This ratio show the growth in investment of the bank, in

this ratio the growth in investment is increases that is good for bank.
bank can increase there profite. In these chart growth ratio of 08, its is
0%, in 09, its is 7.81% and in 10, its is 52.18%.

79
Growth in advance:

6,97,28,320.41
2008= 100 =9.51%
73,25,57,243.6

11,80,31,616.4
2009 = *100 =14.71%
80,22,85,564

2,85,49,651.73
2010= 100 =3.10%
92,03,17,180.5

Growth in Advance
5.00%
4.30%
4.00%
Percentage

3.50%
3.00% 2.50%
2.00%

1.00%

0.00%
2008 2009 2010
Year

Interpretation: in these ratio show the percentage of growth in advance,

that is what percentage of loans given to the customer.in this chart the
ratio of 2010 is increase than the 2009.that is almost 71%. In the 2008
the growth in advance is 4.30%, 2009, its is 2.50% and in 2010, its is
3.50%.

80
Growth in fixed assets:

42,55,809
2008= *100 =-11.78%
3,61,12,357.75

73,73,955
2009= *100 =23.14%
3,18,56,548.75

30,54,385.8
2010= 100 =-7.78%
3,92,30,503.75

Growth in Fixed Assets

25.00% 23.14%
20.00%
Percentage

15.00%
11.78%
10.00%
7.78%
5.00%

0.00%
2008 2009 2010
Year

Interpretation: This ratio show the growth in fixed assets of the bank, in
In these chart growth ratio of 08, its is 11.78%, in 09, its is 23.14% and
in 10, its is 7.78%.

81
CHAPTER.8
FINDINGS

82
 FINDINGS

1. The varachha co-op bank ltd has maintained the capital adequacy ratio
three times more than requirement of RBI. It is 32.08% in 09-10.

2. The interest expense to interest income is increase in 2010 up to 20.48%

more than the 2009.

3. The other income to total income ratio is increase in 2010.

4. The non performing assets are zero in last three year.

5. The varachha co-op banks growth capital ratio has gone to 13.31% to
12.81%.

6. The net profit to deposited ratio was decrease that was 1.87% to 1.49%.

7. The loan to capital ratio is decrease than the last year.

8. Net profit of bank is in 2008, 2.81 crores and in increasing manner in

2009 i.e. 3.02 crores. And also net profit increases in 2010, 3.14 crores

9. Cash position ratio is 0.75% satisfactory result and which is in 2008,

0.72:1 and in 2009, 0.70: 1 and that is more rigorous measure of firms
liquidity position. And in 2010 ratio is 0.80:1

83
CHAPTER.9

CONCLUSION

84
CONCLUSION:
In summary a great many papers both theoretical and empirical have
addressed the question of the cash management at bank. And how
Varachha bank maintains there cash flow. This study has examined the
cash management at bank, with the help of a Ratio analysis. In this
research the cash management process is good in varachha co-operative
bank. Cash position ratio is 0.75% satisfactory result and which is in
2008, 0.72:1 and in 2009, 0.70: 1 and that is more rigorous measure of
firms liquidity position. And in 2010 ratio is 0.80:1.

In This research concludes that cash management is to ensure that there

should be enough cash availability in bank, when the needs arise, not
too much, but never too little.

85
 BIBLIOGRAPHY

Websites:
http://www.varachha co-operative bank.com

http://www.scribed.com

www.rbi.com

Books:

Finance management

I.M. Pandey (2005), financial management, Delhi: Vikas publishing

house pvt ltd.

Annual reports of Varachha co-operative bank

2007-2008, 13th Annual report.

2008-2009, 14th Annual report.

2009-2010, 15th Annual report.

86